The Criminalization of Risk and the Coming Flack Attack

As the swindle of the ages inches closer to its denouement, reporters covering financial scandals -- and a few friends -- have asked me, "What could somebody like you have done for Bernie Madoff?"

My business is crisis communications, which has often meant handling the public relations aspects of white collar criminal defense cases. There is rightful skepticism about the value of this improvisational art because sometimes the medicine works, sometimes it doesn't and, either way, it's impossible to measure.

Whereas attorneys dwell in the world of legal nuance, crisis communications is all about painting plausible alternative narratives to the allegations at hand with a very broad brush. There are, however, crimes that are so monstrous or unambiguous that there is nothing that can be done to paint them as anything but a desolate landscape.

My suspicion is that by confessing at the outset to having operated a "big lie," Madoff was trying a damage control ploy to absorb all of the legal heat so that his family might avoid prosecution and a forfeiture of their vast assets. We'll see.

As David Segal presciently reported in the New York Times, we are at the dawn of a new era of experimental prosecutions for alleged financial crimes. While these cases will ultimately be decided in court, one cannot entirely separate the impending legal tsunami from the culture in which it is occurring.

Indeed, as finance kings "lawyer up" they will also be, well, flacking up. And, as opposed to the unreconstructed goblin Madoff, there may be plausible alternative narratives that may impact prosecutions because, as one defense attorney I've partnered with told me, "The first thing that happens after the judge tells the jury to avoid the news, is they go home and 'google' the defendant."

The goal of litigation PR is to have a positive impact on the legal process - avoiding prosecution, mitigating punishment, or outright acquittal. Abstractions like a "better image" won't cut it. While every case is its own animal, it's not hard to predict the public relations follies and masterstrokes that might be on the horizon.

The follies will include cynical stunts coupling cultural villains with cuddly creatures: Think pre-trial Michael Milken taking underprivileged kids out to a baseball game, as if he was facing prosecution for being mean to underprivileged kids. Or, as the Times' Segal pointed out, J. P. Morgan was photographed during his troubles with a midget on his lap. Okaaay.

We can also anticipate sit-downs with 60 Minutes where a deluded scandal figure will attempt to cower Steve Kroft the way he routinely cowers subordinates who treat him like Mick Jagger. Kroft is no roadie, and he only gets ratings when the accused corporate witch is stoned in the town square, not bloviates about his virtues, which will, of course, be the seductive pitch.

Such charades will be employed not because they are strategically helpful, but because consultants often do what they can bill for, not what benefits the client. Cookie-cutter PR tactics may have therapeutic value for besieged defendants who desperately need validation that they are society's creators not destroyers, but they rarely win the trick.

The more promising trial-support campaigns will seek to trigger reasonable doubt by raising issues closer to the core of the prosecution. The crux of these threats to the liberty, careers and reputations of fallen finance titans will be the criminalization of risk. There is, after all, a subtle but seminal difference between ventures that failed as the result of marketplace events and those that collapsed under the weight of willful malfeasance.

Those facing prosecution associated with subprime mortgages may, unlike Madoff, actually have something to work with. Subprime lending was not a scheme cooked up by a hidden cabal of swindlers meeting in out-of-the-way motel rooms to fix prices, but a loudly-merchandised enterprise by publicly-traded companies that was embraced by government policy that cheered easy home ownership as an American "right." Furthermore, subprime loan consumers were well aware that they were getting something for nothing, which was the whole appeal in the first place.

If our society wants to have a serious debate about its debt-addiction and the government policies and corporate enticements that exploit it, defense teams will argue in the media and in court, so be it. But to declare such behavior criminal because what goes around finally came around ignores the most critical underpinning of prosecutions: Criminal intent.

Cause-and-effect correlations between public relations campaigns and trial and career outcomes may be loosely intuited. Martha Stewart's defiance may not have won her acquittal, but the impression that she had been over-prosecuted may have helped bolster her standing with her ultimate target audience, the women who buy her products. Martha's doing just fine these days, which is the aim of damage control.

HealthSouth's Richard Scrushy's outreach to the African American community in Alabama almost certainly affected jurors who acquitted him after becoming wary of federal officials descending upon their close-knit community to prosecute a self-made, if white, son of Selma.

While these cases were different, what they had in common was a plausible alternative narrative that could be asserted with target audiences either by attorneys, savvy communicators or media surrogates. In impending financial prosecutions, the government will have the narrative advantage and, when one's freedom is on the line, a play for the hearts and minds of the judge and jury couldn't hurt.

Lest we forget that Lyndon Johnson once reminded an aide, "The Washington Post lands on the Chief Justice's front porch every damned morning."

 

Comments

[jhNY]

My advice to all business risk-takers and other captains of industry who drove the boat we all inhabit straight into the rocks: don't worry. If you haven't done anything wrong, you've got nothing to be afraid of.

[outnow]

Creating narratives around risk-taking is what the next decade will be all about. We "need" CEOs who will take risks like stunt pilots do. Just because the jet crashes into the crowd and kills several people is just part of the fun, nothing to be concerned about. Besides, if Wall Street doesn't take risks with other peoples money, then the Brits will take t6he risks and get the profits.

It seems to me that capitalism is morally bankrupt because the moral hazards of the game do not apply to the stunt pilots who engineer the risks. These CEOs are just doing loops and dives and then use their golden parachutes.

Madoff was able to run a Ponzi scheme by implying that he had insider information. The joke was on t6he victims who wanted a larger return with no risk. As W.C. Fields said, "You can't cheat an honest man." Honest people are looking for a deal that is too good to be true.

The attorneys and their consultants are busy spinning the narrative. So are our politicians. I have always believed that Wall Streeters are a bunch of crooks. Too bad investors don't work for a living. What they call work is leveraging bets. The defense of Scrushy is a case in point, black ministers were paid to pack the courtroom in Alabama when the case went to trial. Nixon had his little dog, Patches. "I'm not a crook!" he said. I still remeber him saying that.

[jhNY]

Excellent post, as per usual, outnow. But a quibble: Nixon's famous dog was named Checkers. And it was 20 years later between the murky acquisition of the dog and his infamous and medacious declaration of non-criminal status...

[Truby]

Muddying the waters for fun and profit.